Convenience retail

The Australian Financial Review Tuesday reported expansion plans by Caltex in the convenience space. Newsagents focussed on the convenience model may find this interesting.as the reported Caltex plans reflect a move into product categories we can see as successful already in c-store in the UK and US, especially fuel connected retailers.

Convenience retail continues to be a rapidly moving retail segment. The challenge for independent retailers is the strength and capacity of national and international competitors. The cost of keeping up for indie retailers is high and as we have seen in recent dealings by Tatts, some suppliers give national and international operators favourable treatment.

My suggestion to newsagents in the convenience space is to keep ahead of trends.

This photo shows how 7-Eleven in Victoria is currently trying to make more money from public transport users – people who top up their myki card. Tic Tacs are $2 with any myki top-up.

Woolworths has 24g Tic Tacs for $1.60. Coles has them at $1.75. Hmm … $2.00 does not seem like a good deal. But I guess it is when you consider the convenience style pricing of 7-Eleven.

Officeworks has them for $2.29.

The promotion shows that good marketing is about perception more so than the actual value of an offer.

What is most interesting to me about the display is the pitch itself, that it looks like a compelling offer and is placed right at the location where shoppers would purchase their myki top-up.

The traditional Aussie newsagency has all but disappeared from Sydney’s CBD. In their place, and in far greater number, we have convenience stores. It seems that every block of Sydney’s CBD has two or three convenience stores.

These convenience stores all look the same – they have (overall) the same range, the same prices and offer the same service.

While it would easy to criticise the convenience stores in Sydney as lacking an Australian-ness and not covering anything like the range in a newsagency, they own their space and serve a need. They must be successful given their number.

Thinking about these convenience stores and newsagencies that have taken on convenience retail yet retained a newsagency focus, I find myself wondering about the competitive positioning. Being a convenience store is its own thing: you are chasing shoppers with little time who are in your store primarily because of your location. While destination purchases are up, the mix of what you sell is very different that of a more traditional newsagency.

Newsagents competing with or considering competing with the growing number of convenience stores and their strong banner groups need to think carefully about their own business, they need to decide whether they fully embrace the convenience model opportunity. They need to decide if they are prepared to become a convenience store and stop being a newsagency.

While I am no expert in the convenience space, I don’t think it is something you can half do. You’re either a convenience focused business or not.

If you are a convenience focused business then it informs all your business decisions: ranging, pricing, displays, customer service. This is where the business plan would diverge from the traditional newsagency business plan, it is why newsagents who see themselves as operating a convenience business – in the true sense of that type of business – need to fully embrace it.

Now for clarity I want to note that I am not talking about newsagencies that are convenient because of parking. No, to me, a convenience business is one located for high volume foot traffic, open long hours – into the night – and covering a brand range of consumer products plsu with little or no emphasis on circulation product.

This is part of the food-to-go offering in a Duane Reade ‘drug store’ (convenience store) in Manhattan, near Times Square. I’m posting it because I know of many newsagents with convenience models and others with plans in this retail niche.

While the daily foot traffic in front of this particular location is more than most of us see in a week or two, the range is nevertheless interesting. I like the variety from fruit to sandwiches to salads to water.  The food looks delicious. It is packaged and displayed to drive sales. I have seen that a lot with food in the US. Whereas in Australia prepackaged sandwiches are often displayed to fit in a refrigerated unit, displays I have seen in the last two weeks follow more professional visual merchandising display principles.

Outside of the shot of the photo is a terrific range of sushi.

Click on the image for a larger version.

What we are seeing here is a big business approach that any c-store small business could copy in the context of their space and situation.

In May 2008 I wrote that I was surprised at the proliferation of convenience stores in Sydney.  Walking around Sydney this afternoon I can see that they continue to multiply – more so that in other Australian cities from what I can tell.  And with the migration from CBD based newsagencies to the c-store model is the decline in range choice for the core newsagency category of magazines.

Sydney is full of tourists this time of year and they miss the traditional Australian newsagency retail experience.  For many tourists this would be a truly unique experience.

It’s a sign of the times (high rent, high labour costs) I guess which drives retailers to focus on better margin models.